Four Core Functions of a Platform

Platforms turn connections into transactions, making sure that the transaction is in the proper messaging format and connects correctly. There are 4 core functions of a platform:

Build the audience – companies need to be added to the network so they can conduct business with each other. The more users, the more value produced the more value consumed. Think YouTube – the more people that add videos to the platform the more you can consume and gain value.

Match making – companies need to conduct business with the right suppliers. Each business has its own needs and wants, and others on the network provide value for the right business to consume.

Providing core tools and services to facilitate communication and collaboration. The platform should unlock value with the right businesses at the right time. Typically, platform businesses are built with both producers and consumers in mind. As an example, YouTube (the producer) needs video viewing tools for consumers.

Setting rules and standards to build trust and ensure success are required for the platform business model to work.

Platform business models are at the top of our economy and growing fast. Most of today’s biggest IPOs and acquisitions are platforms – and not just in the US but globally. Today, investors value platform businesses more than linear companies. By 2020, platforms will make up 5 percent of the overall S&P 500.